The Divorce Asset Hunter – LexBloghttps://www.lexblog.com
Legal news and opinions that matterSun, 15 Sep 2019 09:15:35 +0000en-UShourly1https://wordpress.org/?v=4.9.11https://www.lexblog.com/wp-content/uploads/2018/10/cropped-favicon-1-32x32.pngThe Divorce Asset Hunter – LexBloghttps://www.lexblog.com
3232The Jeffrey Epstein Lesson in Overseas Asset Searcheshttps://www.lexblog.com/2019/08/30/the-jeffrey-epstein-lesson-in-overseas-asset-searches/
Fri, 30 Aug 2019 18:13:00 +0000https://www.lexblog.com/2019/08/30/the-jeffrey-epstein-lesson-in-overseas-asset-searches/We’ve written here many times about how tough (i.e. slow and expensive) it can be to track down overseas assets. In short, you need to be going after serious money to make it worthwhile, and you can often get clues to the location of offshore money right here in the U.S. That’s helpful if you have no idea where to begin looking abroad.

But as the Jeffrey Epstein case illustrates, even when you know where to look, it’s a daunting task.

So far, several hundred million Epstein dollars remain unaccounted for. What we know is that he had money in this or that company or account, but that money is long gone. We know he had associates who helped him, but they are either not keen to cooperate as they contemplate cutting their own deals, or else they were not doing anything illegal in helping Epstein minimize his tax bill.

A recent Miami Herald story laid it out: “...a more detailed – but still very limited – look at Epstein’s wealth,” which included this: “From at least 2000 to 2007 Epstein was chairman of a company called Liquid Funding Ltd., which was initially 40 percent owned by the Wall Street investment bank Bear Stearns.”

So, the information is now 12 years old. The story continued: “Coupled with the fact that many of his businesses were operated in or with help from Caribbean offshore tax havens, the documents raise the likelihood that Epstein’s wealth is spread secretly across the globe.”

Epstein had as much as $3.46 million in some of the accounts long ago, but “this pales in comparison to his net worth — reported by his attorneys in court as $559 million — but suggests he had the ability to keep money in far-flung places. A check of the bank coding in the profile suggests that Epstein banked at the time with HSBC Private Bank (Suisse) SA in Geneva.”

You can see Epstein’s entry in the ICIJ database as well as the one for Liquid Funding. The ICIJ doesn’t release all the documents it has to the public, but journalists got a look at the 541 pages of Liquid Funding documents, and this is the best they came up with.

The New York Timesreported recently that in 2011, billionaire Leslie Wexner’s foundation got a $56 million contribution from a trust linked to Epstein. But while the trust was listed as being under Epstein’s control in a Swiss bank account (again leaked via a French newspaper to the ICIJ), “it is not clear from public records who controlled Community Interest in 2011.”

Good start, long way to go. It seems safe to say that in the near future, any money Epstein’s victims can get will come from onshore assets.

]]>The Offshore Asset Search Starter Kithttps://www.lexblog.com/2019/07/01/the-offshore-asset-search-starter-kit/
Mon, 01 Jul 2019 12:06:49 +0000https://www.lexblog.com/2019/07/01/the-offshore-asset-search-starter-kit/This blog has been pretty clear over the years that an offshore asset search is not for the faint of heart or anyone on a tight budget.

We have recommended that even if you think there are assets outside the U.S., you could get a better idea of where they may be by searching U.S. public records first (The Offshore Assets Play Book).

Assume you want to do a little digging on your own for low-hanging fruit – signs of foreign assets that you could hand an investigator. You wouldn’t necessarily find the assets themselves, but you could provide useful leads that save you money if you eventually hire someone to do a fuller search. Some tips:

Begin by searching widely, because the biggest mistake people usually make is to restrict the scope of their search too quickly. How do you search everywhere in the world without breaking the bank? There are a couple of free databases that list corporate directorships in overseas jurisdictions. The Offshore Leaks Database is a collection of various data dumps uncovered by journalists and includes names and addresses of directors and companies in some of the most difficult-to-penetrate offshore jurisdictions. You won’t find bank account information here but it’s a place you should always check. https://offshoreleaks.icij.org. Next, try Open Corporates. As above, it’s free and while not comprehensive it’s a good starting point.

Remember that the Internet works abroad too. You can see company information in quite a few countries if you look for them. Company registration in England, for example, includes more information that you usually get with a private company in the U.S. British subsidiaries of U.S. companies publish their figures even if they aren’t traded on a public exchange. You can also get address information for directors, and with that you can sometimes find a person’s home address. Real estate in the U.K. isn’t easily searchable by name – you need an address. Companies House can help you get it.

The internet now provides instantaneous translation. Say you come up with great public records in Dutch and you have no idea what they say. Open another window and paste a few hundred words at a time into Google Translate, and you can get a serviceable if not exact translation.

Will any of this replace what an experienced investigator can do? Not usually, because as I explain in my book, The Art of Fact Investigation, the real challenge of fact finding is in knitting together the output of various databases. More importantly, it’s playing smart hunches about which search terms to use and filing in the blanks the databases always leave. “John Smith and hidden assets and bank account” as a search term will never get you very far.

Still, if you run down some of these leads your investigator shouldn’t charge you for work you’ve already done, and you may get farther than you would have before.

In any search, that’s called progress.

]]>The College Admissions Scandal: Another Teachable Momenthttps://www.lexblog.com/2019/04/05/the-college-admissions-scandal-another-teachable-moment/
Fri, 05 Apr 2019 18:36:03 +0000https://www.lexblog.com/2019/04/05/the-college-admissions-scandal-another-teachable-moment/The college admissions scandal has been full of wonderful teachable moments – about ethics, humility, greed and corruption. Now for asset hunters there is a new nugget today: overpaying on purpose.

As the Boston Globe reported yesterday, a municipal home assessor found it odd that a home in Needham, Massachusetts (near Cambridge, where Harvard is) sold for close to a million dollars even though it was assessed at $549,000.

Why would someone overpay so much? The mystery deepened when the buyer sold the home 17 months later for a loss of $324,000.

One easy way to hide assets is to overpay for something and then get your money back later from the buyer. It works as long as the buyer is someone you trust. That’s why we always ask clients for lists of trusted friends and associates of whomever we are looking at.

Husband pays $1 million for a racehorse worth $200,000. Seller of horse is his college friend. College friend holds the $1 million, and the plan is to give his friend back the $800,000 after the divorce is finalized.

Of course, in the Harvard case above, it may be that the coach gave out admissions favors instead of excess cash, but the principle is the same: overpay for something in order to get something back in secret.

We always want to know who owns the home, the office, the vacation place of anyone we look at. It can sometimes be a trusted friend holding the asset for them, or a company controlled by the occupant.

And if someone grossly overpays, that’s a red flag, whether you’re looking for cash or a spot at a famous university.

]]>What to Expect from a Divorce Asset Searchhttps://www.lexblog.com/2019/01/28/what-to-expect-from-a-divorce-asset-search/
Mon, 28 Jan 2019 19:01:29 +0000https://www.lexblog.com/2019/01/28/what-to-expect-from-a-divorce-asset-search/At some point with nearly every asset search our firm conducts, we end up telling clients that finding assets is often more than a one-step process.

The one step some people think we need to take is to consult some databases, and voila! A pot of gold they can easily seize.

While there have been times when we discover real estate ownership in the name of the asset concealer, our clients in these cases usually agree that if their spouse is so careless about the houses, there must be much more money being carefully hidden. At least one study we have written about before indicates that most divorcing men hide assets.

The truth is that a successful asset search sometimes doesn’t seem successful to clients who expect an easy grab. We recently did a search and came up with a two-month old company formed by the person we were looking at. It owned no real estate that we could see and had no liens against it.

Our client was disappointed, but I had to tell her that this was potentially good news.

If someone is hiding assets, they would be silly to stick cash in the bank in their own name. Of course, you need to subpoena all the accounts you know about, but the big money will often be hidden in the name of a company you don’t know about. Finding the name of that company is half the battle.

Then, you need to find out where that company may have a bank account. With whom has it done business? Does the person you are searching have a favorite bank or banks? Any business liens at a bank we haven’t seen before in his affairs? Is there a computer we can look at (legally) that could tip us off?

We cannot stress often enough that there is no legal way for us to consult a database and get a list of someone’s bank or securities accounts. You need to go bank by bank with a court order once you are in discovery or have a judgment. If an investigator tells you he can get you this information with “connections,” he is telling you he will break the law. See our post about that called Can You Get Me Bank Accounts and Some Cocaine, Please?

Sometimes, we find the names of new companies domiciled in other countries. That’s good news, potentially, but getting discovery of those company accounts can be expensive, depending on the jurisdiction. If you are owed a lot of money that can be worth it. But going all-out to get $50,000 in the British Virgin Islands probably won’t be.

Asset searches can work out well if, while being as aggressive as you can be, you exercise patience when needed and follow the rules.

]]>Using Forensic Accountants in Divorce Searches: Don’t Forget the Investigator Piecehttps://www.lexblog.com/2018/10/30/using-forensic-accountants-in-divorce-searches-dont-forget-the-investigator-piece/
Tue, 30 Oct 2018 12:23:02 +0000https://www.lexblog.com/2018/10/30/using-forensic-accountants-in-divorce-searches-dont-forget-the-investigator-piece/One of the most frequently-asked questions new divorce-related clients ask us is: “If I need a forensic accountant can you do that?”

The answer we give is that we are not forensic accountants, but you probably need us anyway because forensic accountants don’t do what we do. And, you may need a forensic accountant as well. Fact-finding and forensic accounting go together to give you a much better shot at finding assets than either function working alone.

What’s the difference?

One forensic accountant we have worked with on assignments describes some of her practice as including corporate fraud investigations, [and] lifestyle analysis for divorce and child support.

What won’t this forensic accountant do? Exactly what we will: Searching the globe for hidden assets and conducting interviews.

A forensic accountant can do a brilliant job analyzing the flows of money into and out of a business to see if funds are leaking to private accounts they shouldn’t be touching. But what happens if you don’t know that a business is linked to the person whose assets you are searching?

That is where we come in. Just as we wouldn’t know what to do if presented with thousands of bank statements, tax returns and deposit slips, most forensic accountants don’t excel at an assignment that reads, “What does this person own anywhere in the world? What companies is he hiding? Which people could we talk to to find out more about him and his activities? What’s the best way to approach these people?”

As an example, we were once asked to find assets of a husband who had controlled some 30 businesses owned by him and his wife. She knew little to nothing of how it all worked, but when they were divorcing, things followed a customary pattern.

The businesses had a “bad year” and showed greatly reduced earnings and assets. What to do?

We were hired first and concluded after a week’s work that the husband was hiding what were probably his most profitable companies (over a dozen of them) while showing his wife’s lawyer the money-losers.

Our advice: Subpoena the missing company financial records, and then get a forensic accountant to tell you if the fuller financial picture makes sense.

Asset searching and accounting are specialties. You don’t ask your lawyer to fix your roof, and you don’t ask your plumber to draft a will.

When two jobs are different, two heads are better than one.

]]>Way After Madoff Ponzi Schemes Are Still With Us: How to Avoid Themhttps://www.lexblog.com/2018/10/08/way-after-madoff-ponzi-schemes-are-still-with-us-how-to-avoid-them/
Mon, 08 Oct 2018 13:10:01 +0000https://www.lexblog.com/2018/10/08/way-after-madoff-ponzi-schemes-are-still-with-us-how-to-avoid-them/Nearly ten years on since the arrest of master Ponzi schemer Bernard Madoff, the Ponzi fraudsters are still with us. Maybe not with as much money as Madoff’s billions, but powerful enough to do a lot of damage.

Being devoted to finding assets, this blog doesn’t usually talk about ways to lose them. But we have had asset searches in which we suspect money was lost in a Ponzi scheme. The schemer may have assets, just not as many and not in the hard form the investor thought were there.

It never hurts to remind ourselves of what Ponzi schemes are and how to check to see if one of them is coming for you and your money.

We’ve written here about some of the warning signs that alerted plenty of smart people that Madoff was too risky. Sadly, those signs and repeated whistle-blowing to federal regulators failed to prevent massive losses by investors, as Madoff’s scheme went on and on. Other Ponzi schemes are easier to spot.

The Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Also known as pyramid schemes, they are named after Charles Ponzi (below) who swindled people in the U.S. in the 1920s before his get-rich-quick fraud collapsed.

If the scheme doesn’t make a profit, it’s bound to collapse because it always needs more members than it had before (to supply the prior investors’ returned capital plus an ‘investment return.”)

Combined with various kinds of fraud we’ve dealt with as well as the Madoff experience, we offer some signs that an investment opportunity you are offered may be one to be avoided.

Length of the investment enterprise. Madoff’s decades-long Ponzi operation was unusually old and added to his trustworthiness, but many Ponzis are much shorter-lived affairs. According to a paper Who Gets Swindled in Ponzi Schemes?[1] the average lifespan of U.S. Ponzi schemes prosecuted between 1988 and 2012 was four years. Charles Ponzi’s racket lasted just one year. If your supposed investor can show you no track record or one that’s just a year old, be on extra-careful alert.

Promise of outsized returns. While Madoff cleverly promised low but rock-steady returns (also extremely difficult to pull off for real), the average Ponzi scheme in the sample above promised between 111 percent and 437 percent returns. The lower the promised return, the longer the scheme can on, as long as new investors keep coming in. If it’s a very high return, especially if it’s “low risk,” the old “if it’s too good to be true, it’s probably not true” applies.

If they aren’t asking for millions, it’s probably not a fraud, right? Wrong. The average investment in Ponzi schemes between 1988 and 2012 was $431,000. Half of all investments in Ponzi schemes were for less than $87,800.

Sometimes you don’t have to crunch numbers to realize you’re being courted by a crook. The main reason we concluded one of our clients had been taken by a Ponzi scheme was that the companies he had invested in didn’t even exist.

We are self-serving when we say this, but it could help you too: If you are prepared to invest $100,000 to earn another $50,000 or to double your money, why not take one or two percent of that and spend it on some due diligence?

Investors in Madoff and the other schemes would have saved themselves a world of heartache.

]]>The Missing Piece in an Asset Searchhttps://www.lexblog.com/2018/09/05/the-missing-piece-in-an-asset-search/
Wed, 05 Sep 2018 18:58:30 +0000https://www.lexblog.com/2018/09/05/the-missing-piece-in-an-asset-search/Clients who hire us for asset searches always want to know what we find. As often as not, the big news after an asset search is when we don’t find something we should be seeing but are not.

When someone is concealing the truth, they often put in place a lie to throw you off. One of the best ways to figure out if someone is lying is to ask yourself, “is this likely?”

Remember the Bernard Madoff Ponzi scheme? The people who managed not to get burned turned away from Madoff because of what they didn’t see:

No major accounting firm auditing what purported to be a multi-billion-dollar fund.

No independent custodian.

No regulatory filings in the last couple of years that reflected billions of dollars in holdings.

Computer programs are terrible at telling you what they should be seeing but are not, which is why so many investors never clued in to the Madoff risks that many experienced professionals noticed.

When we do an asset search, we are always on the lookout for what doesn’t make sense. In the past three years, we’ve seen the following:

A man who claimed to put no money in any financial institution, yet whose computer showed a browsing history at two-dozen brokerages. You can keep your money out of banks, but still on deposit with Schwab or TD Ameritrade. Next step: 24 subpoenas to those brokers.

A divorcing husband’s loss-making entity that did no business (zero sales) yet persisted in paying one employee $75,000 a year. And, bank accounts showed the business paid plenty of taxes.

Both of these fit the common scenario in divorce: appearing to have fewer assets that you really have. In the first case, the husband hoped to get money out of his brokerage after the divorce was final. In the second, the company may have been in partnership with another company that was holding back the first company’s share of the profits until after the divorce. The second company could also have been owned by the husband or trusted friend or relative.

As with the Madoff fraud, a computer program did not point to either of the divorce cases above and spit out a “High Risk” or “Possible Asset Concealment” result. Instead, both findings were the product of hours of slow and careful research.

The next time you wonder why an asset search takes hours and not just the feeding of a few names and numbers into a database, remember: Databases tell you (sometimes) what’s there – not what isn’t.

]]>The Right Questions in Discoveryhttps://www.lexblog.com/2018/05/04/the-right-questions-in-discovery/
Fri, 04 May 2018 12:01:11 +0000https://lexblognetwork.wpengine.com/2018/05/04/the-right-questions-in-discovery/Finding assets can be satisfying work, but frustration sometimes comes in realizing that a client’s lawyers haven’t been asking the right questions in their depositions.

We have written repeatedly that getting bank account information without a court order is illegal (other than discovering it on a shared computer or in records lying around). When we are looking for assets before a lawsuit has been filed, getting at bank records is a long shot, and what we look for are banks and brokerage accounts our clients’ lawyers can ask about when the time comes for discovery.

But how unfortunate it is when a client has been through discovery, or perhaps has a divorce agreement the former spouse is cheating on, and we find out that the lawyers never asked the right question.

The right question involves not just what someone makes, but what a company may be paying a company that employs that person or that beneficially owned by that person. The right question might be: “we see that your Oklahoma company paid taxes in seven other states. Why? What activities has the company had there?”

Not long ago, a woman came to us and asked us to find out where her ex-husband is working. We found convincing evidence that he was still employed at the same company as he had been during the divorce. At the time, his boss had been deposed and told our client’s lawyer that the ex-husband was making a paltry amount of money.

This seemed unlikely given his title and his history of high compensation. When we looked at the deposition transcript, it turned out that the boss had never been asked about beneficial ownership of companies.

It can work this way: instead of paying Mr. Jones his full salary, it pays Mr. Jones a small amount of money so that Mr. Jones can look as if there’s not much money to go after. The real money goes to Alpha LLC, a company Mr. Jones controls. Alpha LLC may have an agreement with the company that it will supply Mr. Jones’ services, for instance.

Companies don’t care how they pay you as long as they account for all of their payments and withhold the right amount of taxes and other government payments. If they are public and Mr. Jones is a major executive, they may have to disclose the compensation arrangement in securities filings. But if they are private, they don’t have to tell you about those payments to Mr. Jones’ side companies, trusts, or other vehicles.

Unless of course they are under oath and you ask them.

]]>How to Read Email Headers: Where Did That Email Come From?https://www.lexblog.com/2018/02/26/how-to-read-email-headers-where-did-that-email-come-from/
Mon, 26 Feb 2018 20:01:24 +0000https://lexblognetwork.wpengine.com/2018/02/26/how-to-read-email-headers-where-did-that-email-come-from/Just as it’s nice to know what number someone is using when they call you, wouldn’t it be useful to see where someone was when they sent an email? That information is often contained in the “fine print” of an email known as the “header.”

In brief, the header describes the route an email takes from sender to recipient, sometimes bouncing eight or ten times across the internet in the space of a second or two. It’s composed of a series of internet protocol (IP) addresses –unique numbers assigned to servers that handle your computer traffic.

Most people don’t know the header is there and how to read it but it’s worth learning and it doesn’t take long.

Imagine you are looking at the computer you and your husband share, and you see that he received an email that says: “Sounds good. We’ll transfer the funds when you get over here. Have a good trip. –Tony.”

Wouldn’t it be nice to know if Tony is in Bermuda, Isle of Man, Grand Cayman or Cyprus? Figuring out where to look at overseas assets is sometimes a crapshoot because the money could be anywhere. If you knew where someone banked abroad, you would have a wonderful head start.

It sounds too good to be true, and while header information can be a goldmine, there are some cases in which it won’t cough up the full story.

If your subject is using a virtual private network (VPN), he is able to mask the true location of his computer at the time he sends the email.

Also, even without a VPN a Gmail account will often suppress the IP address linked to the sender of the email (but sometimes the location of the sender’s cell phone or server will come through even with a Gmail account).

On the other hand, in the example above a Bermuda banker is unlikely to be using a Gmail account, because Google admits to reading the contents of Gmail for marketing purposes. Not what a secretive offshore banker would want.

Most importantly, you must remember that to see the email’s header, you need the original email. If someone forwards you an email the header information from the one they are forwarding will be lost to you. You will only see the header information of the forwarder.

For someone to send you header information from an email they have received, they need to capture the header information and then send that to you. There are lots of free header analyzers available to decode the information. Once you have the IP address of the sender, you can do a reverse Google search for the location.

But it may not end there. Say the IP address of the sender turns out to be a hotel in Paris. Only the IT department of that hotel will be able to tell you who was registered to the room responsible for sending the email from the hotel. For that you may need a court order or an investigator in France who can ask the hotel nicely.

This is why we always recommend that when it would be helpful, clients in discovery ask not only for emails, but header information from those emails.

One final word of caution: in the example above when you are looking at someone’s computer, you should only be looking at electronic information to which you have a right. Your lawyer can advise on that.

As we tell our clients, if there is any doubt about whether you can look at a computer, you always have the choice of gathering the evidence without reading it and then asking a judge if you may look at it. If so, go ahead. If not, your damages will be much lower than if you plow ahead into forbidden territory.

]]>“Offshore” Assets Here at Homehttps://www.lexblog.com/2018/01/26/offshore-assets-here-at-home/
Fri, 26 Jan 2018 13:02:22 +0000https://lexblognetwork.wpengine.com/2018/01/26/offshore-assets-here-at-home/We’ve written plenty about why it makes sense to do an onshore search within the U.S. when you’re looking for offshore assets. See for instance our Offshore Assets Playbook and here.

What comes as news to many clients is how secretive people are allowed to be with their assets right here in the U.S. Sometimes we find that the distinction between accounts in an overseas tax haven and one in certain American jurisdictions is meaningless until you have a court order.

That’s why, when we are asked to do an asset search, we always ask whether the person contacting us is in litigation. If not, then finding indications of a bank account in the U.S. may not get you much more information than the same information about an account in Bermuda.

It doesn’t mean you shouldn’t look. It’s just that without a court order, you won’t be able to get any useable banking information legally.

The distinction changes once courts get involved. Then, it’s easier to break open the details of a bank account or even companies in Delaware. Overseas, you can get into the details in many tax havens, but it can be hellishly expensive. Only a very few of our clients have ever litigated in the British Virgin Islands. You need hundreds of thousands or sometimes, millions of dollars to be at stake to start spending the kind of money it takes to go to court in some of those places.

Lawyers who hide assets in such places admit as much. The goal is to make identification so expensive that those looking will often want to cut a deal before spending all those legal fees. Another good reason to look onshore first.

Always a Question of “Which Jurisdiction?”

Just as offshore havens vary widely in the information you can get with and without court orders, so it is in the U.S. For example, Florida offers a lot of company information online, but in Delaware you can pay to have someone form and administer your company with a professional address. There will be no link to you in any publicly available information until you present the Delaware Secretary of State with a court order.

Unless of course (and we’ve seen this) the person didn’t go to the small extra expense of having the company incorporated for him. If he did it himself, you can get the documents that link him to the company. It may cost a few hundred dollars, but in high value cases it’s always worth looking for all the public documents in Delaware just to make sure.

Finding the Clues

What are the best ways to get a sense of what assets may be hidden offshore? The same way you look for Delaware companies or anything else in the U.S. Three of the big ones are:

Litigation. If your person did business with a bank, another person or company and things went wrong, he may have been sued. Even if he was doing business using the secret company, he could have been sued personally as well. That often happens if a borrower has to offer a personal guarantee for debt his new company takes on.

Property. This can mean anything someone owns, but we especially like to look for real estate. Take every address you can associate with the person, and see who or what owns that property. Even if your man is renting, he may be renting from a company he controls. If your search for a landlord or owner ends at a lawyer’s door in Lichtenstein or a BVI company registered in Hong Kong, you’re getting warmer.

Liens (called “charges” in many British-controlled jurisdictions). This is a search you can get done without a lot of money, but you need to know the name of a company to look at. Sometimes mysterious companies show up in someone’s email or on their computer hard drive. Finding out to whom your person owes money can lead to an interview with the creditor and lots more information.

According to a new white paper put out by Francis Financial, a wealth-management firm that specializes in advising women, 63 percent of women the firm surveyed “felt strongly that their husband was hiding assets during the divorce process.” The firm says this was among the first such studies focusing on women who have divorced or are in the process of divorcing.

Where to begin if you are one of those women? The study said that many who thought they were being cheated out of assets “had to grapple with the decision of hiring a forensic accountant,” and this may be an advisable step.

But as we often tell our clients, a forensic account is someone you may wish to hire after you are sure you have looked everywhere for the missing assets. As we wrote last year in How Investigation Helps Forensic Accountants, “where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.”

Some basics:

We don’t start just by looking at what a woman thinks are the places her husband is hiding assets, because if you know where the stuff is, you don’t need us. If assets are hidden you may be surprised at where they turn up.

We always like to give our clients a questionnaire that asks for all kinds of information about the person we’re searching. What might he name a secret company? What was the street he grew up on? Many hedge funds and private equity firms turn out to be named for the childhood streets of their founders. I know this because I always ask where these firms get their names.

Don’t expect us to come up with lots of hidden cash. People hear “assets” and think “cash” because it’s the first asset listed on any balance sheet and the easiest to use once you get it. The problem is that in the U.S., it’s illegal to get bank account information without a court order. What we can do is find likely hiding places of cash, based on business relationships and other legal sources. One client gave us the home computer she and her husband used, and we found that he had visited about a dozen websites of asset management companies. These were ripe for subpoenas at the appropriate time in the proceedings.

You don’t have to find every last penny to get some satisfaction. Once someone knows we have uncovered a significant portion of their hidden assets, their settlement offer can improve quickly. Some women have the means and the drive to litigate for years. Others just want a fair deal and to move on with money sufficient to take care of them and their children. Either way, asset investigations and a good forensic accountant are often worth considering.

]]>Bitcoin: Add Cryptocurrencies to the List of Assets to Searchhttps://www.lexblog.com/2017/08/30/bitcoin-add-cryptocurrencies-to-the-list-of-assets-to-search/
Wed, 30 Aug 2017 19:07:28 +0000https://lexblognetwork.wpengine.com/2017/08/30/bitcoin-add-cryptocurrencies-to-the-list-of-assets-to-search/It may all come crashing down, but if it doesn’t the cryptocurrency market is your newest headache in trying to find hidden assets.

Long written off by many as a joke, cryptocurrencies are still dismissed by many as a bubble waiting to burst. Just the other day, the Wall Street Journal ran this piece arguing that Bitcoin (the largest and original cryptocurrency) is way overvalued.

Launched in 2009, Bitcoin was worth almost nothing for several years. At the end of 2013 it suddenly rose to almost $900, but then fell and never got back to that level until January of this year. Now, Bitcoin is worth $4,600, supposedly driven upward by residents of countries not thrilled by the prospect of devaluation of their home currencies, confiscation/destruction of other property, or both: Venezuela, Korea, and China lead the way, but you can think of other good candidates.

Some true believers in Bitcoin think it should be worth $250,000 to $500,000 in 13 years, based on the idea that by design it can’t be inflated like paper currencies, and assuming cryptocurrencies get to just five to ten percent of the world’s share of payments (and that Bitcoin has about half of that cryptocurrency share).

Most famous as a means for criminals to transact business with little trace, mention of Bitcoin has been enough to get you laughed out of the room in polite company.

But what if $4,000 today could turn into $500,000 in 2030? Would your spouse want to take a chance with $25,000 to have more than $3 million later in life? Especially when it’s hard to trace? If so, read on.

Cryptocurrencies are really nothing more than entries into a big database that record your purchase. The database uses something called blockchain technology, which ensures that the records are decentralized. The record is spread all over the chain and most importantly, once a transaction is confirmed it can’t be changed. Blockchain is for real, and many law firms are investing in it as the future of contracting. You can read more about its world-changing potential in the recent cover story of Fortune Magazine.

How can you tell if someone owns Bitcoin or another crypto? There is no ownership record by name, necessarily. In the U.S. many websites that will sell you bitcoin have to take your name and other identifying information, but they will let you send the bitcoin anywhere you want — no names required. Privacy at other sellers is higher. If you buy bitcoin overseas, the transaction can be completely anonymous.

For asset searches, the first thing to find would be evidence of dollars turned into bitcoin. Have there been bank or Western Union transfers to places named Coinbase (or anyplace with the name Coin in the title), GDAX, CEX.IO? Any cash coming in from such places to pay a few bills?

Are there any records of such currencies inadvertently left around or on the computer you and your spouse may have shared? These currencies are in the end just strings of letters and numbers that look like this: 1F5tAaz5x1HUXrCTLbtMDqcw6o5GNn4xqX. If you see such strings, cryptocurrency could be involved.

There are two ways people most often hold cryptocurrencies. Either on the website where they buy it, or on an electronic wallet (which is really just a mini-computer the size of a thumb drive that securely records their currency id codes). You may find such an electronic wallet, but more likely you will see evidence of computer traffic with one of the virtual wallets on the web.

Keep an eye on Bitcoin. If the optimists are right, there could be millions of dollars of it to get if you can find it. The higher it goes, the greater the chance that the kinds of people who like to buy gold will have cryptocurrency too.

]]>Follow Him! Why Surveillance Isn’t Always the Best Optionhttps://www.lexblog.com/2017/07/21/follow-him-why-surveillance-isnt-always-the-best-option/
Fri, 21 Jul 2017 11:58:32 +0000https://lexblognetwork.wpengine.com/2017/07/21/follow-him-why-surveillance-isnt-always-the-best-option/It’s often the first idea people have when they want to know what their spouse is up to.: Surveillance.

We are not usually in the business of following people around to prove infidelity, but will bring in experienced surveillance personnel in the case of high net worth asset searches. In most cases, the client decides against surveillance for these three reasons:

It can be shockingly expensive, not least because you have to give it a lot of time;

In the era of electronic funds transfer and banking, you could wait years before following someone in the door of a bank or stock broker;

There are cheaper and easier ways to obtain proof of assets and, increasingly, of movement.

The Expense

In a city with a subway system, count on needing at least two people when you follow someone. Figure at least $100 per hour minimum for experienced people. You need two because if the subject jumps into the subway you need someone to drive the car. You need the car in case he takes a taxi or bus. A pair of people watching a building for the evening could run you $1,200 once you add in mileage, tolls and meals.

Multiply that by needing to follow for a few days, and see your surveillance bill balloon. And that is for a comparatively easy situation.

Many buildings have multiple entrances: which one will your man use? To be sure you need to cover all of them. We were involved in a corporate surveillance once that involved a subject staying in a hotel with five entrances. After five days he had emerged just once, had walked to the end of the block and then returned. The bill was $50,000.

Electronic Banking

While getting bank records without a court order is illegal, surveillance to try to get evidence of which bank someone uses should be a desperation move of last resort.

The idea that you search for cash first is antithetical to the philosophy of this blog. If you could easily get at substantial cash, you could probably find the other assets too. The usual reason you need to do an asset search is to find things that cash has acquired: real property, secret businesses, cars, boats, and other things cash can get. In searching for those things, we can often see where the cash came from and then get to the source of the cash.

For instance, a new business never before disclosed could own property with a mortgage. Chances are that this business banks with the mortgagee, and perhaps the business owner does too. You can subpoena that bank.

Other ways to get evidence of where someone banks is to examine computer records from a computer you have the legal right to examine. We recently worked on a case in which computer records demonstrated that the husband had visited some 14 banks and money managers on line. How much cheaper it was to subpoena all 14 than to follow him for even one day!

Cheaper and Easier Ways

As with the computer banking, so with the sedentary guest in the five-entrance hotel above. Even though our client insisted on doing the surveillance, the client had forgotten one essential place to look first.

They were worried that their employee was leaking confidential information to the competition and wondered whether he would venture out of the hotel to meet competitors. But what they had never done was examine his work computer, which they had the right to do. While this employee would have been extremely careless to barter company secrets on his company email, he may have used a personal email account while at work.

Such activity can be recovered from deleted space on a hard drive even after it is “erased.” Again, all for the price of about half an hour’s standing outside five doorways.

As for tracking spouses, consider this story from The Daily Mail, which points out that Uber records are preserved permanently. If a husband takes an Uber on an outing he’s not supposed to be on, the Uber app’s history can be excellent evidence. Excellent and cheap to get.

]]>Asset Investigations and Due Diligence: Your Lawyer Helps Maintain Secrecyhttps://www.lexblog.com/2017/06/05/asset-investigations-and-due-diligence-your-lawyer-helps-maintain-secrecy/
Mon, 05 Jun 2017 12:28:29 +0000https://lexblognetwork.wpengine.com/2017/06/05/asset-investigations-and-due-diligence-your-lawyer-helps-maintain-secrecy/In the past month, two divorcing clients contacted us and wanted asset searches performed without signing up us through their divorce lawyers. Here is the advice we gave them, as we give all our clients:

“Sign us up through your lawyer. If your husband ever discovers that we are looking at him, he could subpoena our report.”

The advantage of routing everything we report through your lawyer? If your spouse ever discovers the existence of our report and sends us a subpoena, your lawyer can argue that the report is protected by the attorney-client privilege and work product doctrines, both of which are intended to make it easy to confide completely in your attorney.

Failure to including your lawyer in the engagement can cause major problems. We had a client (who was himself a lawyer and should have known better) who hired us personally to find out about his soon-to-be ex-wife’s activities. Mostly, he wanted to analyze cell phones that his wife had previously used but were now used by their children. He had paid for the phones and so had the right to look at them.

Problem: He paid us out of his checking account. When his wife successfully obtained his bank records during discovery, she found the check written to our firm and promptly sent us a subpoena.

We had no defense against providing the material, and told our client he would have to get his divorce attorneys to attempt to quash the subpoena. That’s an expensive procedure that may work, but would certainly decrease any leverage you may have against the other side.

When you sign up through your attorney, the rules are simple. All email to us must also be to your attorney, and your attorney should be on the phone if you ever need to talk to us.

Easy to arrange, and can save needless headaches and lost advantage later. After all, if the other side reads our report which says that we suspect Husband has money in Brokerage X in Los Angeles, the first thing that may happen is that the account at Brokerage X is closed and the money moved elsewhere.

While that could eventually be tracked, look at how much extra time and expense it would take to do it. All preventable with a simple engagement letter signed by your lawyer.

]]>The Offshore Assets Play Bookhttps://www.lexblog.com/2017/03/28/the-offshore-assets-play-book/
Tue, 28 Mar 2017 12:00:41 +0000https://lexblognetwork.wpengine.com/2017/03/28/the-offshore-assets-play-book/Clients come to us all the time with the suspicion that their spouse has stashed assets offshore. The problem is that they are not sure where.

If there is one thing that is as difficult as getting money returned from an overseas location, it can be figuring out which overseas location we are even going search.

We recently had a client who thought her husband’s assets could be scattered over five Asian jurisdictions. Clearly she didn’t have the money to look at all five, so we recommended doing our normal triage to see how we could get her the most use from her limited budget.

Our methodology for triage:

For offshore, start onshore. We wrote about this last year on this blog, and the advice still holds. The best clues you will often find for offshore finances will be in the U.S., where not only are public records more plentiful, but the documents tying a spouse to offshore assets could be lying around your own house or stored electronically on a jointly-owned computer. Our clients have found Liberian company documents stuffed in drawers and school bills paid by companies in Bermuda.

Assess the ease of seizure. If you can’t look in every country, why would you start with a place that has slow-moving and/or corrupt courts? It’s not enough to find the asset; you have to be able to take it. I would much rather have a client spend money on a lawyer in the British Virgin Islands than in India or the Philippines. It will cost more, but it won’t take 10-20 years to win.

Assess the probable size of the asset. This can be hard to do if there is an unknown amount of cash sitting in a bank, but cash is one of the hardest things to get your hands on unless you can win a freezing order. This is easier in jurisdictions with better rule of law but also more expensive court systems (see step 2). If you are looking at real estate, it may make sense to do a small amount of work to appraise it before you decide to spend much more to prove ownership and then try to seize it.

Figure out whether the detection of the assets is more valuable to you as assets seized or leverage against the other side. If someone has stashed assets abroad and has not declared them on a tax return, that could motivate him toward a more generous settlement. On the other hand, if you filed taxes jointly, you too could be liable for evasion and should consult both a family law and tax attorney before proceeding further.

Other scenarios are less frightening. We once had a client whose husband turned out to have an offshore company as well as his publicly-traded company in the U.S. Our leverage was to figure out that he had awarded his offshore company a consulting contract with the public company, but hadn’t disclosed it as a connected transaction. This was not news his shareholders would have been happy to hear.

Only when you have taken a cold hard look at all the low-hanging informational fruit should you put investigative resources into offshore jurisdictions.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>The Difference Between Fact Checking and Asset Searchinghttps://www.lexblog.com/2017/03/09/the-difference-between-fact-checking-and-asset-searching/
Thu, 09 Mar 2017 20:23:22 +0000https://lexblognetwork.wpengine.com/2017/03/09/the-difference-between-fact-checking-and-asset-searching/A fascinating interview with the chief fact checker for The New Yorker in the Columbia Journalism Review here got us thinking about the distinction between checking the veracity of facts and finding new ones.

Our firm does both, dealing mostly with the former in due diligence and the latter with asset searches.

The New Yorker’s Peter Canby said that people mistakenly think “the world is divided into facts and opinions, and the checkers just deal with facts.” The more complicated reality, according to Canby, is “fact-based opinions....The way you construct an argument, if there are egregious missing ingredients to it, then it’s something we bring up.”

It’s the reference to “missing ingredients” that got our attention, because an asset search is a hunt for just that: something you think should be there but isn’t. Sometimes people want to call in a forensic accountant to look for the missing assets, and sometimes those accountants succeed.

We’ve written before about the timing between investigation and forensic accounting, in How Investigation Helps Forensic Accountants. Our point there was that “where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.”

Of all the tricks in hiding assets, the one that forensic accountants have the hardest time with is finding companies with no paper trail linking them to the companies the accountants already know about.

It’s one thing if Husband’s real estate company rents space from a Nevada LLC, and that Nevada LLC turns out to be controlled by Husband.

But what if Husband has been able to sever all links between his known companies and his secret ones, in effect conducting a parallel business life?

Then, a whole new mindset takes over. We are not doing a forensic investigation, but a right-from-scratch asset search. We look not at the mystery company in the records and instead go out and track down a new company among the billions of facts on line and in paper registries.

It’s not verifying, but a different kind of exercise, and doing it right can be worth thousands or millions of dollars.

]]>Can You Get Me Bank Accounts and Some Cocaine, Please?https://www.lexblog.com/2017/01/25/can-you-get-me-bank-accounts-and-some-cocaine-please/
Wed, 25 Jan 2017 15:08:48 +0000https://lexblognetwork.wpengine.com/2017/01/25/can-you-get-me-bank-accounts-and-some-cocaine-please/If an investigator told you he could get you some cocaine or find you a way to conduct illegal business with North Korea, would you say “go ahead” simply based on the idea that it could be done?

We ask people this question fairly often when they ask us to get bank account information of a former spouse without a court order.

No matter how often we write that pretending to be someone else in order to gain information about a bank account is illegal, there are always investigators and even lawyers prepared to violate the law to get that information.

Why do we say this? Two reasons:

Some lawyers who call us respond to the above with something along the lines of, “but my investigator last year got bank accounts.”

Search Google for “divorce asset search.” When we did, at least two of the companies that came up on page one offered to get detailed bank account information. Results for you could differ because Google provides different results based on your location, time of day and of course who currently advertises with them.

If you insist on trying to get bank account information without a court order, ask your prospective investigator how he does it without violating the Gramm Leach Bliley Act (15 USC, Subchapter II, Sec. 6821-6827).

One answer we once received from a database that offered to get us such information was that while the Act forbids pretending to be the account holder (thus obtaining the financial record under false pretenses), it supposedly allows banks to answer yes or no as to whether a specific person holds an account there. Banks are not required to answer such questions, and most of the larger ones will not.

We wouldn’t go near such an approach. What got us suspicious that things would not end with a simple yes or no question was that instead of performing this straightforward operation themselves, the database outsourced this job to “specialists” they would not name. Therefore, if the specialists came back with an answer, how would we to know whether or not they used false pretenses?

What is beyond dispute is that without a court order banks may not divulge balance information, account numbers or transaction details to anyone who is not an account holder.

If you are offered such information, assume that information was obtained illegally unless your investigator can show you otherwise.

Maybe the account statement was left in the garbage on public property. Maybe it was lying around in a desk drawer to which the investigator’s client had legal access, or maybe it was on a computer that didn’t need to be hacked in order to obtain the data.

However the data was obtained, the burden could fall on you to show that the data was obtained legally.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>GPS Trackers: Powerful but Often Illegalhttps://www.lexblog.com/2016/12/11/gps-trackers-powerful-but-often-illegal/
Sun, 11 Dec 2016 15:53:31 +0000https://lexblognetwork.wpengine.com/2016/12/11/gps-trackers-powerful-but-often-illegal/GPS trackers are among the hottest topics in ethics discussions today. At least, that is my impression after a series of ethics lectures I’ve given around the country based on my book, The Art of Fact Investigation.

We wrote three years ago about the need for caution before using one of these devices on someone else’s car, here.

They are powerful devices that gather up a ton of information that it would take thousands of dollars and round-the-clock surveillance to duplicate. Today, the trackers are probably among the fastest-changing areas of privacy law, and for good reason.

We know it’s illegal to get someone’s cell phone records, though many people still offer this service. (It’s still illegal. If they offered you drugs or contraband, would you buy it anyway?) Banking and medical records, similarly, are off-limits without the other person’s consent or a court order. Yet, in many states it was only recently that placing a GPS tracker on someone else’s vehicle was not seen as an invasion of privacy.

Times are changing fast. In 2011, the Supreme Court held in U.S. v. Jones that placement by the government of a GPS tracker on anyone’s car amounted to a Fourth Amendment Search that required a warrant. The court split over the reasoning, but gradually the concurrence by Justice Alito (joined by Justices Ginsburg, Breyer and Kagan) seems to be taking hold. They concurred that GPS trackers by the government need court supervision, but not because this amounted to trespassing but because people have a reasonable expectation of privacy that their every movement won’t be monitored that easily.

The Jones case didn’t address the issue of private parties slapping these devices on the vehicles of others, but the states seem to be following suit with respect to the “reasonable expectation” theory.

Among the milder restrictions is New York’s, which added GPS trackers to its anti-stalking law. If you tell your estranged husband to leave any trackers off your car, he’s got to abide by that or face misdemeanor charges. As his lawyer who ratifies that illegal conduct, you could be up on before an ethics panel.

California and Texas have gone further: you just can’t put these trackers on someone else’s car – period.

In my view, that’s the way the rest of the states are probably going. Laws that restrict the placement of trackers to those that don’t drain the car’s battery miss the privacy point and people just won’t put up with this forever.

So, to be safe, put these trackers on a car only if the person authorizing the placement is the owner of the vehicle.

There are plenty of workable alternatives to using GPS trackers. Not as cheap, not as comprehensive, but still legal. We will go over some of those in the next posting.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>When Spying on Your Spouse’s Computer Turns into Wiretappinghttps://www.lexblog.com/2016/09/12/when-spying-on-your-spouses-computer-turns-into-wiretapping/
Mon, 12 Sep 2016 19:27:48 +0000https://lexblognetwork.wpengine.com/2016/09/12/when-spying-on-your-spouses-computer-turns-into-wiretapping/One of the most powerful tools a spouse had to monitor assets or other activities is to look at the shared computer of the spouse under investigation. We have written before in When You’re Allowed to Look Through Your Debtor’s Computers and Phones that as long as a person can show ownership of the computer, anything on that computer is probably fair game to look at, subject to some exceptions.

Sending the contents of what you find to the cloud (a remote server controlled by someone else) is another question. A new case in the Sixth Circuit this month held that software that monitors keystrokes and content amounts to illegal wiretapping under both federal and Ohio statutes. You can read the case, Luis v. Zang here.

This case involved a technology called WebWatcher, which allows a person to monitor a computer’s activity. Where it got the company and the husband in trouble was that WebWatcher allows you to look at the material in nearly real time once the content of the computer activity is stored on the company’s server. The fact that WebWatcher appears captures the information contemporaneously is what turns this into wiretapping, the court held.

The critical distinction in wiretapping jurisprudence is between instantaneous access and access to information that’s stored. If all WebWatcher did was to store a record of the emails sent and received on the computer, that would not have been wiretapping.

The decision applies to the Sixth Circuit, although all the circuits agree that to have wiretapping you need contemporaneous capture of the information. Depending on the kind of software you use to log keystrokes and the transmission (if any) of that information, you could end up with what the Sixth Circuit calls wiretapping or just storage of information you have a right to see.

What’s certain is that it’s incumbent on any lawyer using such information to know how the program works. Just because it comes out of a small box you buy at a big box store doesn’t mean it will produce admissible evidence.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>Surprise! The Super-Rich Adjust Their Behavior as Government Pays More Attentionhttps://www.lexblog.com/2016/07/18/surprise-the-super-rich-adjust-their-behavior-as-government-pays-more-attention/
Mon, 18 Jul 2016 12:00:18 +0000https://lexblognetwork.wpengine.com/2016/07/18/surprise-the-super-rich-adjust-their-behavior-as-government-pays-more-attention/The New York Times was half right and half wrong when it reported that the boom in “trophy homes in the sky” is over. The right part: It turns out that there is not an inexhaustible supply of people willing to spend $50 million or more on a condominium they may rarely visit.

The wrong part of the story is that many of these apartments were anything but trophies: they were means to conceal the wealth of the apartment’s beneficial owner. Many were bought by limited liability companies with difficult-to-trace ownership, often using limited liability companies formed in Delaware.

In some cases, the demand for this real estate was the product of capital flight from overseas, but in others it was money from inside the United States.

In January of this year, federal authorities said they would more closely scrutinize large all-cash transactions in New York and Miami.

As we predicted at that time on our other blog The Ethical Investigator, in a post called Four Ways to Evade the New Rules on Luxury Property, the government’s extra scrutiny appears to have driven the buyers into some of the more than 3,000 remaining counties in the United States.

Nobody looking to hide $1 billion puts it all in one bank account. They spread it around to hedge their risk. In the days that I was a financial reporter interviewing private bankers in Hong Kong, they all had the same comment to questions about loyal customers. The clients usually claimed that all their money was with the banker being interviewed, but the bankers didn’t believe it.

As it goes with money in the bank it now goes with pricey real estate in New York. Why put $80 million into one apartment in one of only a dozen or so buildings when you have your pick of thousands of $2 million homes anywhere in the country?

As we explained, figuring out the name of a shell company that holds real estate is a challenge that can sometimes be cracked, but all-cash transactions don’t have valuable information divulged in mortgages.

However, litigation does. Even very rich people fail to pay gardeners, movers and others who come back and sue them. Newspaper articles are useful too. If a Russian billionaire shows up in a well to do neighborhood, that’s often newsworthy. We can then work backwards from the address to find the name of the company that owns the property.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

Suddeutsche Zeitung, one of the recipients of the leaked Panama Papers reported that one lawyer “represented a female client in a divorce case, and it cost $2 to $3 million to uncover and disentangle the web of front companies into which the assets had been poured by her husband. That is a lawyer’s fee not many are able to pay.”

While not every divorce case involves many millions, even an onshore search follows the same principles: look not just for money in the name of the person but in the name of secret companies that person created.

As I wrote in my just published book, The Art of Fact Investigation, “Given how quickly and cheaply people can set up limited liability companies (and even ordinary corporations) it is folly to assume that a person who may be concealing assets would not have availed him or herself of this simple mechanism.”

Unless there is hard evidence that a person has hidden assets offshore, we like to start onshore for a few simple reasons:

It’s a lot cheaper, and if you find a good haul of assets you may find your way to a reasonable settlement. The extra money offshore could still be there, but it may not make financial sense to go after it because of the fees and the length of time it could take to litigate in Caribbean and other tax havens.

It’s easier to find onshore side companies because of the much larger store of public information in the U.S. compared with most overseas jurisdictions.

The onshore records may provide good leads to the offshore companies. You may find a property deed notarized in the Cayman Islands or Isle of Man, for example. If you get the tax returns in discovery to a new onshore company, you could see payments from an offshore company that could end up being the subject’s secret company.

Wherever you look for secret companies, a few similar search rules apply. These include the propensity to use the same name in multiple companies. We’ve seen net worth statements with Alpha I and Alpha II listed, but the person has omitted Alphas III, IV and V. Other common names include streets the subject grew up on, names of summer camps, favorite pets, or combinations of children’s names or initials.

Offshore or Onshore, people are people and tend to behave the same way the world over when it comes to stashing their cash.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>How Investigation Helps Forensic Accountantshttps://www.lexblog.com/2016/03/28/how-investigation-helps-forensic-accountants/
Mon, 28 Mar 2016 20:29:19 +0000https://lexblognetwork.wpengine.com/2016/03/28/how-investigation-helps-forensic-accountants/What’s wrong with using a forensic accountant in your hunt for a spouse’s hidden assets? Nothing, provided you hand that accountant all the pertinent information you can. We’ve mentioned the need for these professionals frequently on our site, and this Forbes article by Jeffrey Landers explains similar reasoning.

The problem with forensic accountants can be timing. We are often brought into an asset search after a forensic accountant has been hired. The accountant has the sense that something is amiss but beyond being able to testify that the numbers don’t add up, things are at a standstill and the pressure to settle continues to mount.

Our firm is not made up of accountants, and we are not able to testify that the books and records of eight companies controlled by Husband are probably not reflecting all income generated.

But where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.

How can this happen? For the simple reason that forensic accounts are trained to look at what is in front of them and to decide if it makes sense. They can tell if money has been stolen, but are on less firm ground in deciding where that money went. What did it buy? Where might it be sitting today?

Our strength is in taking a fresh look at a person and trying to find everything he owns.

If our client tells us not to bother looking for assets outside a person’s state of residence, we look anyway. If our client tells us about a piece of property that was sold last year, we make sure it really was sold. If it was, we try to see who bought it, because it could be that Husband sold it to a company he, a friend or relative controls.

So by all means, hire a forensic accountant if you need one. Just remember to make sure an investigator with a wide scope has taken a look. No point in examining “all books and records” when there could be millions stashed in a company you know nothing about.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>Thinking About Prenups if Apple Winshttps://www.lexblog.com/2016/02/26/thinking-about-prenups-if-apple-wins/
Fri, 26 Feb 2016 16:42:51 +0000https://lexblognetwork.wpengine.com/2016/02/26/thinking-about-prenups-if-apple-wins/The debate so far over whether Apple should help the U.S. government execute a warrant to see what is on one of its phones has focused on the information of a dead terrorist and the prospective data breach (according to Apple) of millions of law abiding citizens.

The stakes are high, but lost in the discussion is the future of data retrieval to fight another kind of wrongdoing: deadbeat parents who won’t pay child support or greedy spouses who hide assets during and after divorce.

We spend a lot of time looking for such assets, and while we have generated lots of good leads, nailing the case often requires the production of bank accounts.

Imagine this: Husband handles all the finances of his businesses and gives Wife an allowance to run the home, pay the school fees and taxes. When Husband decides to end the marriage, he begins to divert cash taken out of the business to bank accounts held in the names of limited liability companies he has set up around the country. Some of the accounts are in Caribbean tax havens.

The court orders Husband to produce all financial records. He does, but they seem “light.” Husband is ordered to produce his phone as evidence, since some of his banking may be paperless. He hands over the phone but not the password. “If a dead terrorist has rights, so have I,” he proclaims.

Recall that Apple co-operated with law enforcement in handing over everything the terrorist had backed up on the i-cloud. It was just the material not backed up that Apple decided it should not have to help uncover.

What should wives like the woman in our example do to protect themselves against super-encrypted, paperless financial records available for the price of a smartphone?

One idea we had in our office was this: draft a prenuptial agreement that shifts financial burdens in the event that the entire contents of the phone are not backed up once a week. In the event of a divorce, once Husband can be shown to have stopped uploading the records to the cloud, he automatically surrenders his share of tangible assets the wife can find: homes, cars, shares of businesses.

Some states may frown on such an approach, but we will have to figure something out if millions of us (in a world in which Apple prevails) can go dark as to our financial records at the drop of a hat.

Side note: would we back Apple if the facts and company involved were a little different? What if Goldman Sachs built a super-secure bank vault miles underground in the desert? Hedge fund billionaires and Russian oligarchs use the vault to keep records that could prove tax evasion, insider trading, market rigging and a host of other financial crimes. The vault is booby-trapped to explode if anyone tries to break into it. Even if you get past that system, each individual box is rigged so that if anyone dries to drill into it, acid is released and destroys the contents.

When presented with a court order to open the vault, Goldman says, “No. If we break into one bad guy’s vault, the secret of how to disable it would leak out and someone else could break in. Our customers find this offensive.”

]]>What if My Spouse Won at Powerball?https://www.lexblog.com/2016/01/13/what-if-my-spouse-won-at-powerball/
Wed, 13 Jan 2016 18:11:43 +0000https://lexblognetwork.wpengine.com/2016/01/13/what-if-my-spouse-won-at-powerball/In honor of today’s $1.5 billion Powerball jackpot, we bring to the top the piece we wrote nearly three years ago, Jackpot! Finding Lottery Winnings.

The executive summary of that entry is that lottery winnings are federally taxable and therefore harder to conceal than other kinds of assets. If you can subpoena a tax return you can usually see signs of the gambling income unless the other side is actively evading the IRS.

Prior to the subpoena stage, however, it would be a staunch individual who would not be tempted to spend at least a bit of the $900 million cash value of today’s Powerball (assuming a single winner and the election of the lump sum amount after withholding).

But what about if the winnings are older or, while not as large as $900 million, large enough to elicit some new spending?

There, we start to talk about the special way asset searchers look for cash.

Our approach is that absent a court order that gets you into bank account records, the search for cash is most often thesearch for things that will lead you to cash.

In looking for non-cash assets, we pay especially close attention to the way those assets were acquired. Where did the cash come from? Were there companies we have never seen before used as acquiring vehicles?

We once had a case in which a New York resident bought New York property on several occasions over a period of a year. The buyer’s signature on each and every one was notarized in Dallas, where we had no record of any buyer activity. A short time later, a more detailed search revealed Texas business links and more assets.

Like anything else brought out into the sunlight, assets of any kind cast shadows. Those shadows can tell you a lot.

Want to know more?

Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;

Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);

]]>Even if You Get Bank Accounts, Your Work Has Just Begunhttps://www.lexblog.com/2015/12/08/even-if-you-get-bank-accounts-your-work-has-just-begun/
Tue, 08 Dec 2015 20:20:00 +0000https://lexblognetwork.wpengine.com/2015/12/08/even-if-you-get-bank-accounts-your-work-has-just-begun/We are asked all the time to get into the bank account records of the other side in divorce and other matters. As we’ve written many times, most recently here and various entries here, without a court order you can’t make a bank hand over the other side’s banking details.

It’s not just that it isn’t ethical to trick banks into giving us the account information, it’s illegal.

We have written less about what happens when we get to see bank account information either through proper discovery, when the other side volunteers the documents, or when accounts are jointly held by both sides.

It turns out that seeing where cash comes from isn’t always the end of the search. If we see a credit item for $42,000 from Alpha Incorporated in the British Virgin Islands, then what?

Then comes the even harder part of figuring out who is behind Alpha. Are there any incorporation documents we could look at? Does Alpha do business in other jurisdictions where it has to provide the name of a party to sign a document? Are there any liens on Alpha registered in the BVI or elsewhere? Do former employees of the person who deals with Alpha know anything about it?

If it’s important enough, you can get foreign intelligence and law enforcement in on the act, as I mentioned in a television interview last week here in relation to the shootings in San Bernardino.

But usually, just as there is no magic database that spits out bank account information, even government agents with a court order still need to keep digging once the account information is turned over.

Even in the United States, getting behind who is in charge of a Delaware corporation can be nearly as tough. For the private actor with no subpoena power, get ready to do some interviews and to keep digging.

We reply that without a court order, we are not entitled to know the account number, balance or transactions history of anyone’s account without the account holder’s permission. It’s a matter of federal law. We can find an awful lot of assets and information that will lead us to where bank accounts may be, but the accounts themselves are off-limits.

Then comes the follow-up: If you can’t do it, why did an investigator do it for me last year?

Of course, this begs the question that if an investigator did it last year, why are you coming to us? Politeness prevents us from asking this question, and instead we tend to say something like, “If he did that without a court order, that was illegal.”

Why the Penn and Teller reference? It comes from what Penn says at the end of their wonderful show, which came to New York last summer for those of us who can’t get to Las Vegas.

To paraphrase, Penn tells people who have been baffled by the duo’s tricks for the previous two hours that if there is one thing we should take away from the show it, is that all of the “mentalists,” “mediums” and other such hucksters out there are fakes. Those people claiming special abilities are cheating because there is no such magic in the world – at least not the kind of magic sold for money.

This is the kind of magic that some people expect of investigators with “special databases” and “cutting- edge techniques.” Bank account information is not allowed, but somehow special computer programs can get it. It’s all legal, somehow. If it isn’t, why do people provide the service?

What we like to provide is a Penn and Teller kind of wakeup call: people who get the bank information of others without the consent of the account holders are cheating. They are breaking the law by fooling banks into thinking that the investigators are the account holders.

It’s not magic, and unlike Penn and Teller it’s not harmless entertainment. It’s an invasion of privacy and it’s against the law.

]]>Prenup Vehicles Offshore Can Contain Marital Assets Toohttps://www.lexblog.com/2015/09/30/prenup-vehicles-offshore-can-contain-marital-assets-too/
Wed, 30 Sep 2015 13:03:41 +0000https://lexblognetwork.wpengine.com/2015/09/30/prenup-vehicles-offshore-can-contain-marital-assets-too/One of the core principles of good investigation is to assume nothing and start looking from scratch. We have found a lot of money over the years hiding in plain sight: in new companies named after old companies in neighboring states, or even in places mentioned in emails left lying around the house.

Liberian corporations, apartments in Monaco, it’s amazing what turns up among forgotten papers in desk drawers (or on shared computers at home).

One plain sight source for possible martial assets is the structure set up at the time of a prenuptial agreement. That may seem counterintuitive. Why go after something that is not a marital asset and is contractually off-limits?

For the very simple reason that a structure set up with non-marital assets could be a perfect place to hide cash that is properly subject to division at the time of divorce.

Consider the advice of Chicago divorce lawyer Thomas J. Handler, writing in the New York Times a couple of years ago here. He argued in favor of a “stealth” prenup, which is a structure of an offshore trust, combined with a limited liability company and a management company that could be a conventional corporation or another LLC.

That’s a lot of layers and foreign borders to work through and may not be worth it unless there’s considerable money at stake. But if there is, these vehicles can be detected and breached, especially if there is a U.S. corporate vehicle attached to them.

We specialize in finding side companies that people wish to keep secret, and have written about the process many times, including here, where we wrote about secret partnerships as well as LLC’s.

Secrecy is often the most important thing about stealth prenups. As Handler wrote,

A key element of this technique is that it is, in fact, “stealthy”; no disclosure obligation is necessary because these structures have been put in place prior to marriage. Unlike traditional prenuptial agreements, where there is little chance of enforcement without the exchange of full and accurate financial information, no such requirement applies to the stealth prenup.

Even if a prenup should name the offshore-linked assets that are off-limits, they are worth a look anyway. What if the structure has changed over the years? What if cash from marriage should have been placed in the structure supposedly restricted to the pre-marriage assets?

If you don’t look for it, you won’t find it. With a lot of money at issue, that would be a real shame.

]]>Ashley Madison: First Amendment Protections Don’t Travel Wellhttps://www.lexblog.com/2015/09/01/ashley-madison-first-amendment-protections-dont-travel-well/
Tue, 01 Sep 2015 16:41:06 +0000https://lexblognetwork.wpengine.com/2015/09/01/ashley-madison-first-amendment-protections-dont-travel-well/You wouldn’t want to ask anyone to steal bank account information about your client’s spouse. You would never ask for the theft of that person’s medical records. You would not try to break into his office to take the computer on his desk to see his work email.

So why would you delight in using information stolen from Ashley Madison? Why would you even endorse it, as many have, because it somehow gives wrongdoers what they deserve?

Where adultery is legal, disapproving of the activity is no reason to commit a crime. If the Ashley Madison break-in was OK, so was Watergate.

Of course, using information that is in the public domain is different from using information that you yourself have stolen. Newspapers in the U.S. routinely report the products of illegal leaks, but even journalists in countries outside the U.S. who do not enjoy First Amendment protections need to be careful about possessing stolen information.

The next time a newspaper (even in the U.S.) reports on a leak and writes that its reporters have reviewed (but not obtained) documents, you might ask why they didn’t make a copy. It could be because possession is worse in the eyes of law enforcement than a quick look at what someone else obtained.

With Canadian police saying that they intend to prosecute the leak of Ashley Madison’s information as a theft, just as they would go after a bank robber or a credit card hacker, we should ask ourselves what to do with the information that comes from the theft.

Is it admissible into evidence? Lots of information that is reported in the newspapers or on the internet every day would not be admissible, because it is hearsay and doesn’t fall into one of the many hearsay exceptions, or maybe because it violates the no-contact rule. Or, it was procured legally but in a way that bar associations would view to be unethical. For instance, recording a phone conversation is legal in many states if just one of the two people on the call knows about the recording, but many bar associations say lawyers should not record conversations unless someone’s liberty is at stake.

The search for assets would not likely take us toward the Ashley Madison database to begin with. But if one day a client asked about it, my preference would be to warn my client that this is stolen property and to let them look if they want (how can you stop them?) If my client were outside the U.S., I would warn them to proceed with even greater caution.

]]>Envelopes Stuffed with Cash and Secret Offshore Companies: how $20 million goes missinghttps://www.lexblog.com/2015/06/18/envelopes-stuffed-with-cash-and-secret-offshore-companies-how-20-million-goes-missing/
Thu, 18 Jun 2015 15:08:20 +0000https://lexblognetwork.wpengine.com/2015/06/18/envelopes-stuffed-with-cash-and-secret-offshore-companies-how-20-million-goes-missing/In a dramatic divorce case unfolding in Southern California this week, Hydee Feldstein, a retired partner at a large law firm, accused her ex-husband Peter Gregora of stealing $20 million of the couple’s money over the course of their marriage. Feldstein claims Gregora hid the money in secret offshore companies, investment funds, and, in by far the most straightforward method, stuffing cash into envelopes and leaving the money off of the couple’s tax returns.

Before she retired, Feldstein’s practice focused on finance and bankruptcy law. She was the primary breadwinner in the family, and she stated in divorce documents that she entrusted her husband to handle their financial affairs. She claimed that Gregora used this as an opportunity to drain the couple’s joint accounts.

Commentators have been incredulous that a partner who specialized in finance law at a major law firm could be so out of touch with her own finances that she lost track of $20 million of her own money. As it turns out, research shows that Feldstein is not so unusual.

As we wrote about here, a study by Prudential explained that most women, including primary breadwinners, lack confidence in investing and tend to shy away from managing the family finances. No matter how successful women are, they still often leave the big financial decisions up to their husbands. In fact, 73% of men report being the primary financial decision-makers in their families. A dishonest husband combined with a lack of oversight can open the door to mismanagement and, as is alleged in this case, fraud.

We have seen this first-hand in countless cases. Smart, accomplished women come to us looking for money they earned, but which their husbands have magically made disappear. These women often admit to us that they left all of their financial decisions to their husbands, and have never so much as glanced at a bank statement or tax return.

Even in these cases, all hope is not lost. Our clients often have far more valuable information than they realize when it comes to tracking down hidden assets, even if they did not control the family finances. For example, a client may tell us that her husband loves skiing in Colorado, which would lead us to look for a vacation property in that state. Or she may know the name and address of one of her husband’s companies, which could lead us to a dozen other LLC’s that he kept hidden from her. We are often able to find hidden companies, real property, stock holdings, and other assets through in-depth client interviews and our meticulous investigation process.